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Thursday, November 9, 2017

Office rental projections for
the next one year continue to point to solid growth across all prime
markets, according to a recent RICS’ India Commercial Property
Monitor. In terms of the city breakdown,
Bengaluru exhibits stronger rental growth projections when compared with Mumbai
and the National Capital Region (NCR).

RICS’ India Commercial Property Monitor is a
quarterly guide to the trends in the commercial property investment and
occupier markets. The guide is based on survey questionnaires sent out to RICS
members over a month long period ending 6 October, 2017. Respondents were asked
to compare conditions over the latest three months, with the previous three
months and give their views on the outlook.

Capital
value expectations for the next one year for office, retail and industrial
segments are slightly lower. Still, solid growth is expected across segments
over the next one year. Likewise, respondents also lowered their
expectations for rental growth for a second consecutive quarter, with the
largest downgrades coming in the industrial segment.

Credit
conditions have improved slightly in Q3, possibly because of a further cut in
the RBI’s key policy rate in August, this year. The Investment Sentiment Index was unchanged
during Q3, again posting a reading of +6. This measure is an indication of
marginally positive momentum behind the investment market. Investment enquiries
increased in the office sector, with the pace of growth, exceeding that of the
previous quarter. Meanwhile, demand was flat in the retail portion of the
market, and fell for industrial assets. The supply of property for investment
purposes held steady for the third consecutive quarter.

Tenant
demand increased at a reasonably solid pace in the office sector, picked up
only marginally in the retail sector, while demand for industrial space fell
during Q3. Availability of leasable space was more or less unchanged for the
second successive quarter, although a slight rise was reported in the retail
segment. Meanwhile, landlords opted to increase the value of incentive packages
in the office and retail portions of the market

As far as market
valuations are concerned, around three quarters of respondents are of the
opinion that the commercial real estate market is either at or below fair value
currently. This proportion rose modestly when compared with Q2, when around two
thirds of contributors took this view.